Is capping Flexible Spending Accounts in the future?

Published August 2009

Is capping Flexible Spending Accounts in the future?

While there has been a lot of press and focus surrounding healthcare reform, little has been written about the probable impact on Flexible Spending Accounts (FSAs). During the last several months BASIC has paid close attention to healthcare reform activities, specifically the FSA proposals to cap elections and possibly even eliminate them.

Due to the efforts of many folks in the healthcare and benefit industry, the elimination of FSAs is now unlikely. Though this is good news, there is a long way to go before any reform bill is final. While today we expect FSAs will remain a part of the healthcare landscape, the feedback from Washington suggests that we should anticipate two impacts on FSAs.

First, the amount that can be contributed to an FSA will likely be capped. Feedback from various Congressional staff members speculates the FSA contribution cap will probably be set between $1,500 and $2,500.

Keep in mind, any cap total will likely be a combination of medical and dependent care elections.

Second, over-the-counter (OTC) drugs will not be an FSA eligible purchase.

Let your opinion be known
The House and Senate had not written a bill before the August recess. Getting a bill written for healthcare reform is expected to be the top priority upon their return on September 7th. Regardless of your political viewpoint, we suggest you take a few minutes to let your Congressional Representatives know your opinion regarding healthcare reform and the impact on FSAs.

The Employers Council on Flexible Compensation (ECFC), a non-profit organization, has designed a website where you can easily compose and send an email to President Obama, your Senators and your House Representative within minutes. If you reach out to your Representatives, here are some messages to consider including in your communication:

FSA accounts should remain as a critical component in managing healthcare costs.

A cap for FSA contributions should be set above $2,500 and indexed each year as appropriate to reflect inflation.

FSA accounts should be enhanced to eliminate the “use it or lose it” provision.

OTC purchases, which help to control the cost of prescription medications, should remain eligible for FSA purchases.